1 / 24

What’s changed?

What’s changed?. The lady at the eye doctor’s The council fire officer Lacrosse Neo200 Your building is guilty until proven innocent. Attributes of cladding buildings – 1. High rise – polyetheline (PE) Low rise – extruded polystyrene (EPS, just like your esky )

shanna
Download Presentation

What’s changed?

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. What’s changed? • The lady at the eye doctor’s • The council fire officer • Lacrosse • Neo200 • Your building is guilty until proven innocent

  2. Attributes of cladding buildings – 1 • High rise – polyetheline (PE) • Low rise – extruded polystyrene (EPS, just like your esky) • (relatively) recent construction • (typically) capital works funds are not established • (typically) high % of investors • (typically) relatively high gearing of owners

  3. Who is going to pay? • Government? No. • Builder/developer? Unlikely, but see below. • Insurance? No. • Owners? Yes. • Litigation? Maybe.

  4. How do we fund cladding rectification? • Maintenance fund • Re-mortgage (for a special levy) • Strata finance

  5. Can we use our capital works fund? • Yes!

  6. Why use our capital works fund? • It’s there • May as well use those dormant, expensive funds • Limited tax benefits in capital works funds

  7. Why not use our capital works fund? • There’s not enough money in it

  8. If we use our capital works fund, do we need to restore it? • No. Our obligation each year is to consider how we want to fund our future capital works – we always have the choice of: • a levy to the fund • special levies and or • borrowing

  9. We could remortgage our properties and have a special levy • Advantages • It’s done and dusted • Relatively quick (assuming everyone can pay) • Increasing our mortgage spreads the payments over a long time

  10. We could re-mortgage our properties and have a special levy • Disadvantages • If people can’t afford to pay a special levy, this is the worst time to sell, so we are forcing owners to accept a lesser value • Hayne Royal Commission means harder to increase your mortgage • Tax advantages for investors are limited

  11. Re-mortgaging will be more difficult • Credit crunch • Conversion of IO loans to P&I • Declining values mean increasing LVRs • Banks’ increasing conservatism • Banks’ implementation of responsible lending guidelines

  12. Can we borrow? • Yes

  13. Can we borrow? • Disadvantages • We’ll have to pay interest

  14. Can we borrow? • Advantages • Quick – we can get the work donenow before the rush • Solution for everyone • Cheaper (tax advantage) for the majority • Spreads payments over time • We can also fund other works that it is helpful or efficient to do at the same time

  15. Cladding Rectification Agreement • Have you ever heard of one? • New form of special resolution • What council is going to accept the administrative burden and cost • Does not comply with Consumer Credit Code

  16. Litigation – you will need • A case • A great lawyer – operational, commercial and strategic • Deep pockets • Unanimity and cohesion amongst owners and especially the committee over a long period of time • Someone to sue who is culpable and has deep pockets

  17. If you decide to litigate • Litigate, rectify or both? • In what order? • Consider starting both and make sure you push the litigation hard to get a result, one way or the other, in the shortest time

  18. Taxes in strata – 1 • 5 tax profiles • Residential owner-occupier • Personal investor • Company investor • Super fund investor • Owners corporation

  19. Taxes in strata – 2 • 4 relevant taxes • Income tax of owner (x 4) • Income tax of corporation • Capital gains tax on owner (x 3) • Goods and services tax – GST

  20. Taxes in strata – 3 • 3 forms of funding • Maintenance fund – levies to the maintenance fund • Special levy • Strata finance – levies to the administration fund

  21. Taxes in strata – 4 • Each of the 3 forms of taxes impacts each of the 4 types of owners in different ways for each of the 3 types of funding • And each owner’s personal situation and tax profile is different

  22. What does this mean for strata? • Anyone who says that X is the best form of funding in strata is at best, ignorant. At worst, stupid. • The answer to “what is the best form of funding in strata?” is: “It depends.”

  23. Lannock will fund 100% of the rectification costs of all strata corporations.

  24. Lannock Funded Lacrosse

More Related